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3 Funds to Arm Yourself for an Awful August

Seasonality's ugly side tends to come out this month. Be prepared.

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iPath S&P 500 VIX Short-Term Futures

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The CBOE Volatility Index — or the VIX — is known as the market’s “fear gauge.” This barometer of market volatility moves higher as investor anxiety climbs.

Those well-versed in the ways of the VIX know that it tends to spike sharply when the market moves lower. For example, the VIX almost doubled in value from mid-May to mid-June this year as the S&P 500 fell in the wake of Ben Bernanke’s comments on potential “tapering.”

By purchasing the iPath S&P 500 VIX Short-Term Futures (VXX), you can hedge a pullback in the market by profiting from the increase in volatility that is certain to happen when the market declines.

One catch with trading volatility, though, is that when volatility moves, it tends to do so pretty quickly, so this option should only be utilized by more nimble and active traders.

Our current target for the VIX is for a 30% increase over the next month, meaning VXX unites should appreciate by a similar move.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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